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Does Spending More on Tobacco Control Programs Make Economic Sense? An Incremental Benefit-Cost An.

Wednesday, November 30, 2011Posted by: Natalia Gromov

A
recently published article, "Does Spending More on Tobacco Control Programs
Make Economic Sense? An Incremental Benefit-Cost
Analysis", offers additional evidence that spending
money ontobacco control is a wise investment for
states.

The full
article was published
in the journal Contemporary Economic
Policy.

Anti-Smoking
Programs Pay Off

Spending money on
anti-smoking programs is a wise investment for states, even in tough economic
times, according to a new study.

In
fact, the return on a tobacco control program can be as much as 14 to 20 times
the initial investment, according to a paper published online in the journal
Contemporary Economic
Policy.

When the major U.S.
tobacco companies settled litigation with the states in 1998 in what is known as
the Master Settlement Agreement, expectations ran high that the
cash windfall would fund tobacco control and cancer research programs, explained
study authors Sudip Chattopadhyay, PhD, and David Pieper, PhD, economists at San
Francisco State University.

The
settlement required the tobacco companies to pay out $206 billion to the states
over 25 years, but the agreement had no power to compel the states to spend the
money in any particular way. Halfway through the 25-year payout period, states
have increasingly shifted that money out of anti-tobacco activities, using it to
pay for things like roads and college scholarships, and to cover budget
shortfalls.

But
even before the Master Settlement Agreement, some states had already embarked on
tobacco control programs, starting with a 25-cents-per-pack tax on cigarettes to
fund their anti-smoking efforts. Other states soon followed suit, and the
average state cigarette tax in 2010 was $1.45 (with a high of $4.35 in one state
-- New York).

The
authors wanted to see if there was a connection between how much states spent on
tobacco control and how that impacted tobacco demand, and whether that impact
became greater over time.

They used a variety
of sources, including state data on tobacco sales from 1991 to 2007, tobacco use
survey data, U.S. Census figures, and labor statistics, and found a
statistically significant long-term impact of tobacco control spending on
cigarette demand.

The
results suggest that funneling the tobacco settlement money away from
smoking-prevention programs may be "short-sighted," the study authors
wrote.

The
economists found that despite the CDC recommending that states spend, on
average, $12.34 per resident on tobacco prevention efforts, the average state
was spending about $2.00 per resident instead.

Using a variety of
economic models, the economists projected that if a given state spent the CDC
average recommended amount of nearly $74 million on anti-tobacco policies, the
estimated benefits -- from reduced medical costs, reduced Medicaid payments, and
increased productivity -- would range from about $853 million to more than $1
billion. And the savings increased over time, the authors
noted.

Even if a state
devoted just an additional $1 million to combat smoking, it would result in 1.4
million fewer packs of cigarettes being smoked by residents and save $7 million
in avoided healthcare costs, $7 million in lost productivity costs, and $2
million in Medicaid payments.

Adding those savings
up means that for every $1 million a state spends on smoking prevention, it
could save at least $16 million down the road, the researchers concluded. And
the savings are greater the more a state spends, they said. For instance, if a
state were to spend $50 million, it could eventually reap a savings of $737
million.

"In
short, the benefits of the control programs far outweigh the costs," the authors
said.